Rare Coupon Hikes Signal China Developers’ Need for Debt Relief
- Builders have raised coupons by over 100 basis points in 2020
- The move draws analyst attention to refinancing risks
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As many Chinese companies take advantage of declining interest rates to slash borrowing costs, some debt-laden developers are doing the opposite -- raising coupons to avoid having to buy back debt.
Developers make up almost a third of 16 bond issuers that substantially increased coupons this year when a put option allowing investors to sell their holdings back to the company came due, according to Bloomberg calculations based on public data. With a coupon hike of 100 basis points or more, the developers and other companies stand as outliers among almost 201 bond issuers, the majority of which maintained or lowered coupons.